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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

Freddie Mac made two announcements this week. The first is a long expected administrative
change to requirements for private mortgage insurance (PMI) which will go into
effect on March 31, 2019. The company updated
these requirements under a mandate from its regulator the Federal Housing
Finance Agency (FHFA), incorporating changes related to its assessment of
credit and counterparty risk. The new financial requirements include revisions to
the risk-based asset requirements, enhancements to the treatment of approved
risk transfer transactions, and adjustments to risk transfer credit arising
from counterparty risk associated with reinsurance transactions. PMI is required for mortgages where the
borrower is making less than a 20 percent down payment.

Gina Healy, vice president of credit
risk transfer of Freddie Mac's Single-Family Business said, "In order to better
manage the counterparty risk underlying the important role that mortgage
insurers play in high-LTV lending, the eligibility requirements are designed to
cover minimum financial and operational requirements for private mortgage
insurers approved to do business with Freddie Mac and selected by lenders."

Healy said many of the changes have
been previously announced via the PMIERs Guidance. FAQs about the changes are
available here.

The second announcement is programmatic and may have larger
ramifications. The company is expanding its support for shared equity
homeownership programs. Share equity is
a concept that has been around for generations under a variety of names, but
with the growing lack of housing affordability, it may be ready for more
attention.

The Encyclopedia of Housing defines
shared equity housing as "A generic term for various forms of resale-restricted,
owner-occupied housing in which the rights, responsibilities, risks, and
rewards of ownership are shared between an income-eligible household who buys a
home at a below-market price and an organizational steward who protects the
affordability, quality, and security of that home long after it is purchased." Or, more simply, a form of homeownership in
which homeowners claim only the equity they created through their own dollars
or labors. When the owners of
shared-equity housing resell their homes, they typically recoup their
investment, augmented by a modest return. They depart with more wealth than
they had when entering the home, but they do not pocket all of the equity
contributed or created by the larger community. Most of this community wealth
remains in the property, keeping it affordable for the next generation of low-
or moderate income homebuyers.

One
of the common types of umbrella ownership of these properties is a Community
Land Trust, and Freddie Mac has now developed a mortgage specific to these
entities. The company says, "This offering makes it easier for lenders to do
business in the shared equity homeownership field by increasing communication
and collaboration between the Servicer and the Community Land Trust
organization."

"In developing the Community Land Trust Mortgage offering we were able to
take a fresh look at existing mortgage products in this space, listen to the
needs in the housing industry and collaborate with leading organizations to
bring this innovative offering to market," said Mike Dawson, vice president of
affordable strategy and policy at Freddie Mac's Single-Family Business. "Our
offering and flexibilities aim to balance transactional ease for lenders with
underwriting that promotes sustainable homeownership for borrowers. These
combined efforts will facilitate the preservation of more affordable housing
units over time for shared equity homeownership program providers."

To create this offering, Freddie Mac said it has built strategic alliances
with national, state and local community organizations with experience in the
field, such as the Grounded Solutions Network, City First Enterprises and the
Florida Housing Coalition, among others.

"Offerings that bolster shared equity homeownership in hot real estate
markets like Washington, DC are essential to preserving the ability for its
residents to remain and flourish," said Ginger Rumph, executive director,
Douglass Community Land Trust /City First Enterprises. "Our collaboration with
Freddie Mac to develop a product in support of a community land trust in the
Historic Anacostia neighborhood, and Wards 7 and 8 in Washington, DC, will pave
the way for a model that can be replicated in similar geographic areas across
the country."

Freddie Mac said its new servicing requirements for Community Land Trust
Mortgages are unique in providing shared equity homeownership with more
opportunities and additional time to help borrowers who have missed their
mortgage payments. This approach will help prevent foreclosures and help
Community Land Trust organizations exercise their right of first refusal in
extreme circumstances to preserve property affordability.

The Freddie Mac Community Land Trust Mortgage, which will be available
starting on November 5, is part of Freddie Mac's Duty to Serve Plan. Both
Freddie Mac's and a similar plan from Fannie Mae are mandated by FHFA.

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